Rental insurance: how does it work?

Taking out rental insurance - or surety bond insurance - is one of the best ways to ensure that both the landlord and tenant have peace of mind when signing a property rental agreement.

This is because it guarantees several benefits for both parties, ensuring that there are no losses for either party.

In general, rental insurance is the main way to rent a property when you do not have a guarantor.

Well, let’s learn more about what this type of insurance is and how it works.

• What is rental insurance?
• How does rental insurance work?
• What is it for?
• Advantages
• Disadvantages

What is rental insurance?

Like other forms of rent, it is an insurance that must be paid monthly by someone who wants to rent a property but does not have a guarantor.

This person is normally required by real estate agencies to close the contract.

Thus, the tenant pays an amount to an insurance company that undertakes to pay the landlord the amount of a few months' rent, if the tenant does not comply with his commitment.

It can also cover other debts left, such as property tax or overdue electricity bills.

How does rental insurance work?

At the time of hiring, the tenant must provide personal data and documents for credit check.

Once everything is approved, the rental insurance must be paid by the tenant monthly and the value varies, on average, from 8 to 12% of the rental value.

At the end of a year, the amount is just over one month's rent paid.

In general, insurance companies guarantee tenants other benefits in addition to debt payment insurance.

Free electrician and locksmith services may be available, for example.

The insurance can be activated by the property owner from the second month of overdue rent and it can take up to 30 days for the owner to receive the amounts.

It is important to know that the insurance only guarantees payment to the tenant, but not forgiveness of the debt, which must be paid to the insurer later.

What is it for?

It is important to ensure that, even without a guarantor, the landlord will not be at a loss if the tenant has an unforeseen event and cannot pay the rent.

Furthermore, it provides a certain peace of mind to the tenant who, for some reason, cannot meet the commitment and needs help until they become financially stable again.

Advantages

The biggest advantage is certainly being able to rent a property without a guarantor. In addition, it is very useful for the landlord to be able to receive rent in case of unforeseen circumstances with the tenant. Finally, the tenant can have additional benefits, such as services offered by the insurance company.

Disadvantages

The cost can be high and end up weighing heavily on the pockets of those who rent a property. There is also the fact that, even with the insurance paid, the overdue rent will have to be paid to the insurance company anyway.

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Due to the high cost of rental insurance, Citas always gives preference to rental contracts without a guarantee , the form of guarantee that is easy on the pocket!

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